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May 19 2017
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What to expect from a solar contract

What to Expect from a Solar Contract

By Buy Solar Panels No Comments

You’ve decided to go solar. Now it’s time to start thinking about how you’re going to pay the solar bill. Like buying a car, you can purchase the system outright or lease it. You could also sign a Power Purchase Agreement or a PPA, meaning you buy energy from your rooftop solar panels but you don’t own the system. An investment company does. Head over to our Solar Financing Guide to find a detailed breakdown on how you can pay for your solar project.

Your choice of ownership options affects how much money you will save on your solar panel system. It also affects the responsibilities you take on after signing a contract. We talked about the basic pros and cons of ownership options in our solar education series. Now let’s break them down further so you can see what to expect, what to watch out for, and whether direct ownership, a lease, or a PPA is the right option for you.

What is Direct Ownership?

What to expect

Like buying a new car, you select from a range of features offered by a solar installer, who’s then responsible for fulfilling your order. You can pay for a solar energy system outright or take out a solar loan.

The number of solar loan options has steadily grown in the last few years. You can now choose between short and long-term solar financing options with little to no money down. In some states, you can tack the system cost onto your property tax bill using an option known as property-assessed clean energy (PACE) financing. It’s a good idea to consider all of your solar options.

What to watch out for

Your system is supposed to last 25 years or longer, so it is important to choose quality components and a solar installer that you can trust. Do your homework and compare at least three bids in order to get the best deal.

As the owner, you will be responsible for maintenance. While there usually isn’t much maintenance required, it is a good idea to put aside 1% of the system price each year to cover expenses. Make sure you know how to monitor system performance. Otherwise, a drop in energy production can easily go unnoticed for months, leaving a serious dent in your solar savings plan.

Who should do it

If you want to maximize your savings, direct ownership is the way to go. Multiple financing options can help if you don’t want to put all the money on the table. Make sure that you take full advantage of the 30 percent federal tax credit (ITC). Only if you can’t take the advantage of the credit would leasing be a better option.

What is a Solar Lease?

What to expect

Solar lease offers are a big reason why the number of residential solar systems in the US has ballooned to one million in 2016. They are convenient and require little-to-no upfront payments.

If you decide to lease a solar system, the solar company installs solar panels, an inverter and everything else that is needed to produce clean energy. You pay to lease the system, and in return, you can lower your monthly electricity bill with the energy it generates. After a certain amount of time, typically 25 years, the company takes the system back or gives you a buy-out option.

What to watch out for

Many lease companies offer contracts with escalators, meaning your rental fee for the solar system will go up by a certain percent each year, typically 2 percent to 3 percent. While that is less than your utility rate increased in the past years, there is no guarantee that this trend will continue. If things go bad, your lease payments can increase faster than your utility rates, and your savings would shrink. The lower the escalator in your contract, the higher are your future savings.

The leasing company is responsible for maintaining the solar system. But to make sure that it will do what is needed to keep performance up, you should ask for a performance guarantee in writing. The lease provider will demand access to your property in order to maintain the system. Make sure those legal demands don’t go further than you feel comfortable with.

It can get tricky if you want to sell your house before your solar lease is up. Either your buyer needs to take over the lease or you will have to buy out the contract. But who is responsible to patch the holes in your roof if the company takes its solar system down? You’d want to fully understand the process before you sign.

And don’t believe for a minute that all lease offers are the same. Get at least three bids and compare thoroughly.

Who should do it

If you just look at the numbers, owning a solar system will save you much more money than leasing one. And while not having to worry about maintaining panels and inverter is convenient, it is a minor issue for systems built from quality components. But there remains one major reason to sign a lease contract: If your tax burden isn’t high enough to take advantage of the 30 percent federal tax credit, leasing might be the way to go. In that case, the lease provider claims the credit and hands some of those savings down to you.

What is a Power Purchase Agreement (PPA)

What to expect

Just like a lease, a Power Purchase Agreement (PPA) constitutes third-party ownership. The solar panels on your roof are owned by the PPA provider, not you. But instead of paying for the system, you pay a monthly fee for the energy it produces. Since those contracts usually cover a 25-year period, you essentially agree to purchase your energy in advance for a pre-negotiated price.

What to watch out for

The pros and cons of a PPA are very similar to a lease agreement. One thing you should especially look out for in a PPA is that the amount of energy the system produces actually meets your needs. The contract will typically require you to buy all the energy the system generates, whether you can use it or not. So if the solar system is too big, you’ll pay for something you don’t need. If it is too small, you don’t save as much as you could have. Make sure you know your annual energy consumption, measured in kilowatt-hours (kWh), and check that the system’s estimated output is a match. Also, keep in mind that your energy needs might change over 25 years. Consumption will go down once the kids are off to college or it might rise if you get an electric car.

Who should do it

Once again, it mainly comes down to whether or not you can take advantage of the federal tax credit yourself. There is no distinct advantage of a PPA over a lease or the other way around.

How Solar.com Can Handle All Of This For You

At Solar.com we are always in the corner of the homeowner. From initial information collection to vetting solar installers to analyzing the bids that come in, to provide the installer our contract to ensure you are projected, all the way to months after installation we are always here for you. If you ever have any questions please do not hesitate to call (888) 454-9979.

May 19 2017
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buy or lease solar panels

Why You Need To Know Your PPW When You Go Solar

By Solar Panel Cost Per Watt No Comments

 

Before even speaking with a solar company there are a few things you need to know in order to ask the right solar questions. Understanding the cost of solar is at the top of the list.

Price Per Watt (PPW) is how installers price out a solar system, allowing you an easy way to compare prices from different installers (aside from our incredible online solar marketplace). Price Per Watt is exactly as it sounds – the price for each watt of solar you are purchasing. PPW only applies for purchased systems and is not a factor you can look at for a standard Lease or PPA option.

 

Solar_PPW_Guide.jpg

The Price in PPW should be based off the whole system price, including all tax credits and incentives. The Watts is based off on installed DC watts, which can be found by adding up the wattage of all the panels being installed. For simplicity, solar systems are generally measured in terms of kilowatts (kW), rather than watts. To find the number of watts, simply multiply the kWs by 1,000.

Here’s a quick example: If you buy a 6kW (6,000 watts) system and the cost is $20,000 before any credits, the system PPW is $3.33 per watt ($20,000/6,000 watts). On that $20,000 you may receive a 30% tax credit and even additional rebates depending on your utility. Assuming you qualify for the full tax credit, the system’s net cost to you is $14,000.

If you are given an advertised PPW by the installer, make sure it meets all of these criteria:

  1. The price is the gross price of the system. In the example above, if the installer uses the net price ($14,000) and divides by the 6,000 watts, the PPW comes out to $2.33/watt. This is NOT the appropriate number to compare against other price quotes.
  2. The watts that you are looking at should be DC watts. On some quotes, you may see AC watts along with kWh (kilowatt hours). When computing PPW, make sure you are using DC watts.
  3. The price should include EVERYTHING. Some installers may break down different aspects of the system. They may give you a gross cost and then have some additional costs for permits or other variables. This is not the appropriate way to quote prices in the solar industry. The labor, material, financing, overhead, warranties, permits, and engineering are all typically wrapped into one base cost. In solar, this is just how it is done. It’s a full package deal and most installers do not break down the costs.

Here are some key factors that affect PPW:

  • Equipment Quality: Brand name solar panels such as SolarWorld or LG are going to be more expensive than Tier 2 Chinese panels. The type of string or micro inverter used can lead to a price difference of as much as 35 cents per watt.
  • Roof Type: If you have a composite shingle (asphalt) roof you are in the lower end of costs for installation. Installing on a tile roof can increase system costs by as much as 10%. Steep roofs and ground mounts add more costs as well.
  • Multiple Arrays: If your roof is a simple A-frame, the costs will be much less than a roof with panels being mounted on multiple surfaces.
  • Extras: If you need a panel box upgrade or trenching, you will be looking at some higher costs. A panel box upgrade typically costs between $1,500 and $3,000, while trenching will depend on the distance the conduits are required to be buried.

There are many more factors that will affect PPW, with the largest difference maker being system size. As a system gets larger in size, many of the costs do not increase proportionately, leaving you with a lower PPW.

Your all-in PPW for a solar system in California should be between $3.00 and $4.00 per watt depending on the variables. The only time you may see a price above $4/watt is if you choose high-end SunPower panels or if your system is smaller than 4kW. Other than that, if you see a price above $4/watt, it’s time to find some more bids.